PHARMACEUTICAL LICENSING
STRATEGIES
Best practices in deal-making,
valuations and strategic
management
By Steven Seget
ii
Steven Seget
Steven Seget is Principal at Delphi Pharma, and provides independent strategic consulting services to the pharmaceutical and biotechnology industries. Steven previously managed the strategic healthcare consulting function at Datamonitor and has an MBA from the London Business School. [email protected]
Delphi Pharma provides strategic, financial and market–based solutions to clients, focusing primarily on the portfolio management, business development and licensing functions. Delphi Pharma combines an extensive research network, applied analytical expertise and an established track record to deliver high value results and measurable impact to its clients. www.delphipharma.com
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Table of Contents
Pharmaceutical Licensing Strategies
Executive Summary
10
Introducing pharmaceutical licensing 10
Licensing trends 10
Licensing process 12
Licensing valuations 13
Licensing best practices 14
Chapter 1
Introducing pharmaceutical
licensing 16
Summary 16
Introduction 17
The age of the partnership 17
Definitions 19
Report outline 20
Chapter 2
Licensing trends
22
Summary 22
Introduction 23
Headline deal trends 23
Licensing deal partners 27
Licensing deal types 32
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Chapter 3
Licensing process
42
Summary 42
Introduction 43
A complex process 43
In-licensing versus out-licensing 45
Licensing strategy 47
Opportunity identification 49
In-licensing 50
Out-licensing 52
Licensing evaluations 56
General portfolio management 57 Applications for licensing evaluations 59
Deal-making and agreement 60
Key elements of a pharmaceutical license agreement 60
Post-deal management and analysis 61
Alliance management 62
Using outside agencies 64
Chapter 4
Licensing valuations
70
Summary 70
Introduction 71
Valuing deals 71
Current best practices 73
Deal-making valuation model 76
Model inputs 77
Evaluation modeling 82
Model outputs 88
Model refinements 91
Chapter 5
Licensing best practices
100
Summary 100
Introduction 101 Top licensing deals of the 21st century 101
Genentech-Roche 101 Idenix-Novartis 102
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AstraZeneca-AtheroGenics 103
Preferred licensing partners 104
Leading in-licensing companies 104
Novartis 105
Leading out-licensing companies 107
Cephalon 107
Recommendations for the future 109
Licensing trends 109
Licensing process 109
Licensing valuations 110
Licensing best practices 110
Chapter 6
Appendix 112
Primary research survey 112
Sources 115
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List of Figures
Figure 2.1: Number and average value of top 10 pharmaceutical company licensing deals, 2001-2005 24 Figure 2.2: Expected change in number of licensing deals during 2006 25 Figure 2.3: Expected change in average value of licensing deals during 2006 26 Figure 2.4: Number of top 10 pharmaceutical company licensing deals by partner, 2001-2005 28 Figure 2.5: Number of top 10 biotech company licensing deals by partner, 2001-2005 30 Figure 2.6: Number of biotech out-licensing deals by partner, 2001-2005 31 Figure 2.7: Number of top 10 pharmaceutical company licensing deals by deal type, 2001-2005 33 Figure 2.8: Number of top 10 biotech company licensing deals by deal type, 2001-2005 35 Figure 2.9: Proportion of product-based licensing deals by therapy area, 2001-2005 36 Figure 2.10: Number of product-based licensing deals by therapy area, 2001-2005 37 Figure 2.11: Number of R&D licensing deals by development stage, 2001-2005 38 Figure 2.12: Number of biotech R&D licensing deals by development stage, 2001-2005 39 Figure 3.13: Expected change in number of potential partners chasing each licensing deal during
2006 44 Figure 3.14: Expected change in the length of time required to complete a licensing deal during
2006 44 Figure 3.15: The pharmaceutical licensing process 46 Figure 3.16: Parties involved in identifying potential licensing opportunities, 2006 65 Figure 3.17: Parties involved in conducting due diligence for potential licensing opportunities, 2006 66 Figure 3.18: Parties involved in the valuation and negotiation of potential licensing deals, 2006 67 Figure 4.19: Information shared between partners during licensing negotiations, 2006 74 Figure 4.20: Valuation techniques used in determining optimal licensing deal terms, 2006 75 Figure 4.21: R&D costs by phase, 2000 78 Figure 4.22: R&D lead times by phase, 2000 79 Figure 4.23: R&D success probabilities by phase, 2000 80 Figure 4.24: Drug market diffusion curve – product lifecycle 81 Figure 4.25: Likelihood of outcomes for new phase I, phase II and phase III drugs 85 Figure 4.26: Expected real values (non-discounted) for new phase I, phase II and phase III drugs 86 Figure 4.27: Discounted expected real values for new phase I, phase II and phase III drugs 87 Figure 4.28: Discounted expected real values for new phase I, phase II and phase III drugs
(adjusted for lower R&D cost inflation) 88 Figure 4.29: Deal outcomes for out-licensor 89 Figure 4.30: Deal outcomes for in-licensor 89 Figure 4.31: Share of expected deal outcomes by partner 90 Figure 4.32: R&D costs by phase by therapy area, 2000 92 Figure 4.33: R&D lead times by phase by therapy area, 2000 93 Figure 4.34: R&D success probabilities by phase by therapy area, 2000 94 Figure 4.35: Peak sales and year of peak sales by therapy area, 2000 94 Figure 4.36: Discounted value of sales by therapy area, 2000 95 Figure 5.37: In-licensing partner of choice, 2006 104 Figure 5.38: Business development and licensing department, Novartis 106 Figure 5.39: Licensing process at Novartis 106 Figure 5.40: Out-licensing partner of choice, 2006 107 Figure 6.41: Licensing trends survey respondents by company focus 112
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Figure 6.42: Licensing trends survey respondents by functional responsibility 113 Figure 6.43: Licensing trends survey respondents by licensing responsibility 114
List of Tables
9
10
Executive Summary
Introducing pharmaceutical licensing
With falling R&D productivity and continued healthcare cost containment and generic competition pushing down the returns available for successfully launched products, only those companies able to complement internal efforts with a strong partnering strategy will be able to remain competitive over the next five-to-ten years.
Since Eli Lilly and Genentech forged the first truly ‘strategic’ licensing agreement almost 30 years ago (Humulin, 1978), the licensing deal has been a fundamental part of every pharmaceutical and biotechnology company’s strategy.
The pharmaceutical industry remains one of the most risky industries in the world, with the licensing agreement providing the best safeguard for managing, or at least sharing, some of the inherent risks involved with pharmaceutical R&D.
Given its relative infancy, the strategic alliance – one that involves some level of ongoing collaboration between partners – has grown in frequency, value and complexity over the past 20 years or so.
Licensing trends
A pharmaceutical company’s limited resources to manage inter-company relationships and collaborative projects places an upper limit to the number of different agreements that can formed each year. However, there has been a consistent increase in average deal values between 2002 and 2005, likely to be the result of deal sizes increasing to include multiple development compounds. It appears that the leading pharmaceutical companies have determined that the size and quality of the deal is more important than signing a greater number of deals.
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2001 was at the height of the ‘golden age’ for biotechnology, where company valuations were high and every pharmaceutical company wanted to access their technologies. However, a period of rationalization in the following three years saw the leading pharmaceutical companies turn away from risky biotechnology companies and back to more traditional, but relatively less risky, pharmaceutical partners. However, 2005 saw a shift in licensing activity by partner, with leading pharmaceutical companies significantly increasing licensing activity with biotech partners at the expense of intra-pharmaceutical deals.
As with deal numbers and deal values, the proportion of relationship-based alliances was also high in 2001, before falling and steadily increasing to a new peak in 2005. Again, these trends appear to confirm the leading pharmaceutical companies’ new found confidence in committing to long-term alliances.
The greatest growth in product-based pharmaceutical licensing over the past four years has been in agreements involving cancer therapies. Many biotech approaches, including monoclonal antibodies and growth factors, have their most valuable applications in the treatment of cancer.
Licensing agreements in later stages, particularly in phase II, appear to be driving growth in licensing activity over the past five years. This trend is consistent with the increased maturity of the biotech sector and the emergence of biotech companies with the resources and capabilities to develop lead drugs to later stages of clinical development before seeking a pharmaceutical partner.
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Licensing process
Growth in the number of companies involved in chasing each licensing agreement will lead to increased pressure on licensing lead times, requiring greater levels of resources to be committed to the identification and evaluation of potential opportunities and partners.
Deal failure is often the result of one or more partners not clearly identifying their strategic aims for a licensing deal. Pharmaceutical companies must not enter into an agreement without having determined that the licensing opportunity satisfies a real and valuable objective for the company.
Having a clear understanding of what you can and cannot offer potential partners is critical in order not to over promise or waste time negotiating over the wrong deal with the wrong partner.
Many small, but ambitious biotechnology companies have managed to do a good job with the preparation of presentation materials and the identification of target licensing partners only to make a bad job of establishing a first contact with the company and failing to make any further progress.
If you are a small biotech looking to agree a blockbuster late-stage licensing agreement with a top 10 pharmaceutical company you can either spend money on a good lawyer now to negotiate and agree a favorable contract or spend double the money later down the line having to continually defend claims from your eventual licensing partner.
Biotech companies look towards specialist agencies and key investors, such as venture capitalists, in order to support the licensing process. Pharmaceutical companies appear to have greater levels of licensing resources and expertise in-house, with the majority completing the entire licensing process without outside help.
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Licensing valuations
According to a survey of 142 licensing executives, pharmaceutical companies are more likely than biotech companies to share financial evaluations during licensing negotiations, with more than 80% of companies sharing at least a single point financial projection and almost 50% sharing a more detailed probabilistic evaluation.
The most common evaluation technique used in determining optimal deal terms is a discounted cash flow net present value (NPV) calculation, which is used in more than 70% of companies according to surveyed licensing executives.
A deal-making valuation model is one used specifically to agree licensing terms between partners. While the approach might be similar to that used to provide recommendations for selecting the most valuable licensing opportunities to pursue the outputs of the model are quite different.
If the inputs into the valuation model cannot be agreed upon by both licensing parties then the outputs of the exercise will not provide any common ground for negotiation. Similarly, if the modeling approach and any assumption are not clear and defendable then the effective use of the evaluation model for negotiation will be limited.
The first test as to whether two companies are going to be successful in collaborating together as part of a strategic licensing agreement is whether or not they are able to negotiate an agreement based on significant common ground. If two companies are unable to agree upon the true value of the licensing asset and subsequently on the fair distribution of risks, returns and responsibilities then there is little hope that they will be able to reach a satisfactory conclusion once the real work of implementing a licensing deal begins.
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Licensing best practices
With no two drugs or partnerships the same, there are no hard-and-fast rules for successful pharmaceutical licensing. Lessons can be learned by looking at the leading deals and deal-makers, but the application of best practices must always be directed by the specifics of the deal, rather than reverting to a list of generalized benchmarks.
The leading strategic pharmaceutical licensing deal, mentioned by the greatest number of surveyed licensing executives, is the ongoing relationship between Roche and Genentech. Over the course of the 16 year relationship Roche has acquired non-US marketing rights to a range of Genentech products, including Rituxan (rituximab) in 1995, Herceptin (trastuzumab) in 1998 and Avastin (bevacizumab) in 2003.
Novartis was considered to be the in-licensing partner of choice in 2006. The company has worked hard to position itself as a preferred licensing partner, employing a structured process providing a quick evaluation of opportunities and the early involvement of senior management to expedite decision-making. As part of this standard review process, Novartis employs a single gateway for all opportunities allowing for improved coordination and contact management.
Cephalon was considered to be the out-licensing partner of choice in 2006. Cephalon’s licensing model of acquiring rights to marketed products in order to generate revenues cash flow to help fund the development of in-house products appears to have worked well. More importantly, as an out-licensor, the company has been willing to share promotional rights for its lead products, particularly in the US and Japan, in order to maximize the returns from its internal assets.
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CHAPTER 1
Introducing pharmaceutical
licensing
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Chapter 1
Introducing pharmaceutical
licensing
Summary
With falling R&D productivity and continued healthcare cost containment and generic competition pushing down the returns available for successfully launched products, only those companies able to complement internal efforts with a strong partnering strategy will be able to remain competitive over the next five-to-ten years.
Since Eli Lilly and Genentech forged the first truly ‘strategic’ licensing agreement almost 30 years ago (Humulin, 1978), the licensing deal has been a fundamental part of every pharmaceutical and biotechnology company’s strategy. The pharmaceutical industry remains one of the most risky industries in the
world, with the licensing agreement providing the best safeguard for managing, or at least sharing, some of the inherent risks involved with pharmaceutical R&D. Given its relative infancy, the strategic alliance – one that involves some level of
ongoing collaboration between partners – has grown in frequency, value and complexity over the past 20 years or so.
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Introduction
Pharmaceutical licensing strategies: Best practices in deal-making, valuations and strategic management provides a detailed analysis of licensing strategies in the
pharmaceutical and biotechnology industries. The report draws upon deal-making trend data, primary research survey results and a profile of best practices in pharmaceutical licensing in order to present a set of actionable recommendations for optimizing deal-making. With falling R&D productivity and continued healthcare cost containment and generic competition pushing down the returns available for successfully launched products, only those companies able to complement internal efforts with a strong partnering strategy will be able to remain competitive over the next five-to-ten years.
The age of the partnership
The purpose of this report is to provide a strategic perspective on the increasingly important area of pharmaceutical licensing. Questions the report attempts to answer include:
Why is licensing important in the pharmaceutical and biotechnology industries? What are the recent trends in pharmaceutical licensing activity?
What are best practices in developing a robust licensing process?
What can be done to optimize licensing deal values through collaborative evaluations?
What does it take to become a partner of choice?
What lessons can be drawn from the key successful deals formed over the past 10 years?
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In order to answer these questions the report brings together research and analysis from multiple sources. Leading deal-tracking databases including MedTRACK and Recombinant Capital provide licensing trend data. A survey of 142 senior licensing executives drawn from across the pharmaceutical and biotechnology industries provides a real-time assessment of current licensing processes, practices and expectations regarding future deal-making trends. Finally, company profiles and licensing case studies provide a detailed insight into successful licensing strategies and best practices.
Ever since Eli Lilly and Genentech forged the first truly ‘strategic’ licensing agreement almost 30 years ago for recombinant insulin (Humulin, 1978), the licensing deal has been a fundamental part of every pharmaceutical and biotechnology company’s strategy. Licensing has been used to provide a more flexible mechanism through which R&D, sales and marketing and, most important of all, revenue and income streams can be balanced over time. The biotechnology industry could not exist on venture capital alone, and the pharmaceutical industry would be in a sorry state without the breakthrough innovations licensed from biotech companies. The pharmaceutical industry remains one of the most risky industries in the world, with the licensing agreement providing the best safeguard for managing, or at least sharing, some of the inherent risks involved with pharmaceutical R&D.
The strategic alliance – one that involves some level of ongoing collaboration between partners – has grown in frequency, value and complexity over the past 20 years or so. Much of the growth in pharmaceutical licensing is linked to the emergence and development of the biotechnology industry, with deal-making activity broadly tracking funding levels and valuations for biotechnology companies. An illustration of the rise in value and complexity of strategic licensing is provided by the 2001 agreement for Erbitux between Bristol-Myers Squibb and ImClone Systems. Nothing illustrates the importance, value and complexity of pharmaceutical licensing better than a story that starts with a headline value of US$2 billion and concludes with an initial non-approvable letter from the Food and Drug Administration (FDA), a rewrite of the licensing contract and, as a sub-plot, jail time for one the key protagonists.
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Definitions
The term ‘strategic pharmaceutical licensing’ presents many questions regarding scope and interpretation. In order to avoid confusion the following definitions of key terms can be applied throughout the remainder of the report:
License – an agreement between two or more parties relating to the ownership of intellectual property (IP) rights, and in particular those rights pertaining to a technology, development compound or marketed product;
Pharmaceutical license – an agreement as above that involves IP rights relating to a pharmaceutical technology, development compound or marketed product. For the purposes of this report a pharmaceutical license is used as an umbrella term to include IP relating to both pharmaceutical and biotechnology products and technologies;
Strategic license – an agreement as above that also involves an ongoing collaboration between partners, such as a co-development or co-commercialization agreement;
Licensing – the act of forming a license, relating either to process or ongoing activity in forming licenses;
Deal-making – see licensing above;
In-licensing – the act of acquiring the rights to a technology or product; In-licensor – the company acquiring rights to a technology or product; Out-licensing – the act of divesting the rights to a technology or product; Out-licensor – the company divesting rights to a technology or product.
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Report outline
The report has been divided into four key sections. The licensing trends chapter presents an overview of recent trends in pharmaceutical licensing and details industry expectations for future deal-making. The licensing process chapter provides a practical guide to pharmaceutical licensing and sets out the different phases involved in optimal deal-making for both in- and out-licensors. The licensing valuations chapter outlines a simple licensing valuation model based on independent sources to support negotiation and deal-making efforts between prospective partners. Finally, the licensing best
practices chapter presents a set of detailed cases studies for successful licensing deals
and leading licensing partners in order to provide key lessons for optimizing strategic pharmaceutical licensing.
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CHAPTER 2
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Chapter 2
Licensing trends
Summary
A pharmaceutical company’s limited resources to manage inter-company relationships and collaborative projects places an upper limit to the number of different agreements that can formed each year. However, there has been a consistent increase in average deal values between 2002 and 2005, likely to be the result of deal sizes increasing to include multiple development compounds. It appears that the leading pharmaceutical companies have determined that the size and quality of the deal is more important than signing a greater number of deals. 2001 was at the height of the ‘golden age’ for biotechnology, where company
valuations were high and every pharmaceutical company wanted to access their technologies. However, a period of rationalization in the following three years saw the leading pharmaceutical companies turn away from risky biotechnology companies and back to more traditional, but relatively less risky, pharmaceutical partners. However, 2005 saw a shift in licensing activity by partner, with leading pharmaceutical companies significantly increasing licensing activity with biotech partners at the expense of intra-pharmaceutical deals.
As with deal numbers and deal values, the proportion of relationship-based alliances was also high in 2001, before falling and steadily increasing to a new peak in 2005. Again, these trends appear to confirm the leading pharmaceutical companies’ new found confidence in committing to long-term alliances.
The greatest growth in product-based pharmaceutical licensing over the past four years has been in agreements involving cancer therapies. Many biotech approaches, including monoclonal antibodies and growth factors, have their most valuable applications in the treatment of cancer.
Licensing agreements in later stages, particularly in phase II, appear to be driving growth in licensing activity over the past five years. This trend is consistent with the increased maturity of the biotech sector and the emergence of biotech companies with the resources and capabilities to develop lead drugs to later stages of clinical development before seeking a pharmaceutical partner.
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Introduction
Pharmaceutical licensing has undergone significant changes over the past 20-30 years. Trends in deal-making activity have shown an increase in the value and number of licensing agreements, while the types of company involved, stage of development of the deal subject and complexity of the agreement have also changed significantly. Today’s strategic licensing deals are more valuable, numerous and complex than ever before, and as a consequence companies must build competences in the licensing field in order to support these trends.
Headline deal trends
The number and average value of licensing deals involving the top 10 pharmaceutical companies both increased between 2001 and 2005, as shown in Figure 2.1. The top 10 companies were considered to be those with the highest pharmaceutical product sales in 2005 (Pfizer, Sanofi-Aventis, GlaxoSmithKline, AstraZeneca, Johnson & Johnson, Roche, Merck & Co., Novartis, Wyeth and Bristol-Myers Squibb), with all licensing activity for companies acquired by the top 10 companies between 2001 and 2005 consolidated over the period.
Average deal values for the top 10 pharmaceutical companies have risen consistently between 2002 and 2005. Average deal values are based on the headline deal values released by partnering companies at the time of signing an agreement. As a result these deal values often refer to the maximum potential deal value and usually exclude any royalty payments to be paid once a drug is brought to market.
The number of licensing deals involving top 10 pharmaceutical companies has both increased and decreased at different periods between 2001 and 2005. While licensing activity in 2005 is the highest it has been over the five years, similar peaks were reached in 2001 and 2003.
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Figure 2.1: Number and average value of top 10 pharmaceutical company licensing deals, 2001-2005 300 285 297 273 304 172 149 170 187 266 0 50 100 150 200 250 300 350 2001 2002 2003 2004 2005 N u m b e r of de a ls 0 50 100 150 200 250 300 350 A v e ra g e d e a l v a lu e ( $ millio n )
Number of deals Average deal value ($ million)
Source: MedTRACK Deals & Alliances database Business Insights Ltd
By looking at an analysis of the top 10 pharmaceutical companies only, we can see that the number of licensing deals that have been signed by any one company appears to have reached a plateau between 2001 and 2005. While an average of 30 deals per company is significantly more than would have been seen 20 or even 10 years ago, licensing activity in the leading companies appears to have reached a natural limit. A company’s limited resources and abilities to manage inter-company relationships and collaborative projects places an upper limit on the number of different agreements that can formed each year. However, it is noticeable that there has been a consistent increase in average deal values between 2002 and 2005. This is likely to be the result of deal sizes increasing to include multiple development compounds. It appears that the leading pharmaceutical companies have determined that the size and quality of the deal is more important than driving increases in the number of deals. As a result, the same
25
number of licensing partners are providing a greater level of licensing value over a greater number of licensed compounds.
Around two thirds of the 142 licensing executives surveyed for this report considered the number of pharmaceutical licensing deals likely to increase during 2006, as shown in Figure 2.2. This increase in licensing agreements was considered likely to be higher in the biotechnology industry than in the pharmaceutical industry. It appears that there is significant room for growth in licensing activity in the pharmaceutical and biotechnology markets, but growth will be primarily driven by smaller companies building up their licensing capabilities and increasing their deal-making activity to the levels found in established pharmaceutical and biotech companies.
Figure 2.2: Expected change in number of licensing deals during 2006
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Pharma Biotech Other Overall
P ropor ti on of s u rv e y r e s ponde nt s Increase significantly Increase somewhat Stay roughly the same Decrease somewhat Decrease significantly
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The slowest level of growth in licensing activity is expected in specialty, drug delivery, generics and diagnostic companies. These companies are either well-established licensors, such as specialty and drug delivery companies, or are in industry sectors where licensing plays a less important role, such as generics and diagnostic products.
Around 60% of surveyed licensing executives expect average deal values to increase in 2006, as shown in Figure 2.3. Again, the likely increase is considered to be higher for biotech companies than for pharmaceutical companies. Only a very small percentage of survey respondents (just over 10%) expect deal values to decrease in 2006. Trends in increased average deal values found over the past four years appear set to be continued in the near future.
Figure 2.3: Expected change in average value of licensing deals during 2006
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Pharma Biotech Other Overall
P ropor ti on of s u rv e y r e s ponde nt s Increase significantly Increase somewhat Stay roughly the same Decrease somewhat Decrease significantly
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Alongside increases in industry deal numbers and headline values, it also appears that pharmaceutical licensing deals are becoming more complex. In 2004, GlaxoSmithKline and Theravance signed a multi-compound, multi-therapy area deal that involved sophisticated financial put and call options on Theravance shares in support of the biotech company’s imminent initial public offering (IPO). Other deals involving major equity stakes and multiple, cross-portfolio compounds include the 2003 agreement between Novartis and Idenix and the landmark agreement between Genentech and Roche, first signed in 1990 and revised in 1995. Sliding royalty rates, contingent equity valuations and complex territorial and market splits for co-developed and co-promoted compounds are fast becoming the norm. Those companies not able to negotiate their way through these sophisticated deal terms will quickly find themselves on the wrong end of a bad deal.
Licensing deal partners
Between 2001 and 2005 it appears that the leading pharmaceutical companies have returned back to the biotech industry as a source for licensing. 2001 was at the height of the ‘golden age’ for biotechnology, where company valuations were high and every pharmaceutical company wanted to access their technologies. However, a period of rationalization in the following three years saw the leading pharmaceutical companies turn away from the more risky biotechnology companies and back to more traditional, but relatively less risky, pharmaceutical partners. However, as shown in Figure 2.4, 2005 saw a shift in licensing activity by partner, with leading pharmaceutical companies significantly increasing licensing activity with biotech partners at the expense of intra-pharmaceutical company deals.
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Figure 2.4: Number of top 10 pharmaceutical company licensing deals by partner, 2001-2005 50 63 63 51 57 115 106 106 100 157 135 116 128 122 90 0 50 100 150 200 250 300 350 2001 2002 2003 2004 2005 N u m b e r of t op 1 0 pha rm a l ic e n s ing de a ls Pharma Biotech Other 16.7% 22.1% 21.2% 18.7% 18.8% 38.3% 37.2% 35.7% 36.6% 51.6% 45.0% 40.7% 43.1% 44.7% 29.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 P ropor ti on of t op 1 0 pha rm a l ic e n s ing de a ls Pharma Biotech Other
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Over the last five years the biotechnology industry has matured to become a tried and tested source for good science and collaborative development. This has been helped along by a period of consolidation in the industry to allow stronger biotech companies to emerge with full pipelines and robust development capabilities. Both pharmaceutical and biotech companies stand to benefit as a result of increased licensing activity between the two – with pharmaceutical companies gaining access to innovative and valuable compounds and biotech companies receiving improved deal values and long-term collaborative partners.
Taking a look from the other side of the industry, the trends for the top 10 biotech companies based on total 2005 revenues (Amgen, Genentech, Genzyme, Serono, CSL, Biogen Idec, Gilead, Chiron, MedImmune and Cephalon) appear to closely mimic those found in leading pharmaceutical companies. As was the case for the top 10 pharmaceutical companies, licensing activity for the top 10 biotech companies in 2005 saw an increase in the number of deals signed with other biotechnology companies.
Interestingly, it appears that the leading biotechnology companies are not behind the increase in pharmaceutical-biotech licensing found for the top 10 pharmaceutical companies, with the number of deals between leading biotech companies and pharmaceutical companies decreasing consistently between 2003 and 2005, as shown in Figure 2.5. It is clear that leading pharmaceutical and biotechnology companies are much less likely to partner amongst themselves than they are to partner with smaller companies that represent less of a strategic, competitive threat.
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Figure 2.5: Number of top 10 biotech company licensing deals by partner, 2001-2005 8 11 8 9 18 41 34 32 33 48 30 35 42 32 26 0 10 20 30 40 50 60 70 80 90 100 2001 2002 2003 2004 2005 N u m b e r of t op 1 0 bi ot e c h l ic e n s ing de a ls Pharma Biotech Other 10.1% 13.8% 9.8% 12.2% 19.6% 51.9% 42.5% 39.0% 44.6% 52.2% 38.0% 43.8% 51.2% 43.2% 28.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 P ropor ti on of t op 1 0 bi ot e c h l ic e n s ing de a ls Pharma Biotech Other
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As a proportion of all biotech out-licensing deals, other biotech partners continue to provide just over 60% of all licensing partners, as shown in Figure 2.6. This proportion has been on the increase over the previous two years, and is consistent with the figures for leading biotech companies in Figure 2.5. However, with trends in licensing activity for the top 10 pharmaceutical companies showing an increase in the number of deals signed between leading pharmaceutical companies and biotech companies it appears that the growth in biotech licensing is greater for intra-biotech deals than for pharma-biotech deals. It is also evident that smaller pharmaceutical companies are not yet fully embracing the renewed interest in biotech licensing found in their larger contempories.
Figure 2.6: Number of biotech out-licensing deals by partner, 2001-2005
41.7% 41.4% 44.7% 43.1% 39.4% 58.3% 58.6% 55.3% 56.9% 60.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 P ropor ti on of bi ot e c h out -l ic e n s ing pa rt ne rs Biotech Pharma
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Licensing deal types
In order to better understand trends in pharmaceutical licensing agreements signed over the past five years three key categorizations were used:
License/acquisition – including all agreements that involve a simple transaction
involving intellectual property (IP) rights;
R&D/S&M – including all agreements involving a transactional exchange of IP
rights and some exchange of expertise and know-how;
Collaboration – including all agreements involving a significant, ongoing
relationship, either in R&D or marketing and sales.
For the top 10 pharmaceutical companies, there has been a move away from simple licensing/acquisition deals towards more relationship-based alliances involving collaborative R&D and sales and marketing, as shown in Figure 2.7. As with deal numbers and deal values, the proportion of relationship-based alliances was also high in 2001, before falling and steadily increasing to a new peak in 2005. Again, these trends appear to confirm the leading pharmaceutical companies’ new found confidence in committing to long-term alliances. The smaller number of simple license/acquisitions in 2005 is also representative of a down-turn in pharmaceutical mergers and acquisitions, which are often followed by portfolio consolidation and the divestment of overlapping products/compounds.
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Figure 2.7: Number of top 10 pharmaceutical company licensing deals by deal type, 2001-2005 56 34 44 20 40 74 91 83 88 73 79 68 95 87 86 91 92 75 78 105 0 50 100 150 200 250 300 350 2001 2002 2003 2004 2005 N u m b e r of t op 1 0 pha rm a l ic e n s ing de a ls Collaboration R&D/ S&M License/ acquisition Others 18.7% 11.9% 14.8% 7.3% 13.2% 24.7% 31.9% 27.9% 32.2% 24.0% 26.3% 23.9% 32.0% 31.9% 28.3% 30.3% 32.3% 25.3% 28.6% 34.5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 P ropor ti on of t op 1 0 pha rm a l ic e n s ing de a ls Collaboration R&D/ S&M License/ acquisition Others
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For the top 10 biotech companies, the five-year trend towards relationship licenses is similar to that found for the leading pharmaceutical companies. As shown in Figure 2.8, the leading biotech companies have increased the number of R&D/S&M agreements at the expense of simple license/acquisition agreements. Interestingly, the number of collaborative agreements has remained relatively unchanged between 2001 and 2005 – likely to be a function of big biotech turning to smaller biotech to drive growth in their licensing activity over the past five years. Big biotech have grown to reach a critical mass and can now avoid having to sign collaborative out-licensing agreements in order to bring their drugs to market. At the same time, the leading biotech companies have increased R&D/S&M licensing activity, particularly with other smaller biotech companies, in order to fill their pipelines and maintain a throughput in R&D.
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Figure 2.8: Number of top 10 biotech company licensing deals by deal type, 2001-2005 15 8 11 15 29 23 24 15 21 24 17 30 20 30 26 25 20 28 26 0 10 20 30 40 50 60 70 80 90 100 2001 2002 2003 2004 2005 N u m b e r of t op 1 0 bi ot e c h l ic e n s ing de a ls Collaboration R&D/ S&M License/ acquisition Others 18.8% 9.8% 14.9% 16.3% 36.7% 28.8% 29.3% 20.3% 22.8% 30.4% 21.3% 36.6% 27.0% 32.6% 32.9% 31.3% 24.4% 37.8% 28.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 P ropor ti on of t op 1 0 bi ot e c h l ic e n s ing de a ls Collaboration R&D/ S&M License/ acquisition Others
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Licensing deal subjects
More than 20% of all product-based pharmaceutical licensing agreements signed between 2001 and 2005 involved cancer indications, as shown in Figure 2.9. Agreements involving infections and central nervous system (CNS) indications accounted for approximately 14% each, followed by cardiovascular and circulatory system indications and autoimmune and inflammation indications.
Figure 2.9: Proportion of product-based licensing deals by therapy area, 2001-2005 20.5% 13.9% 13.8% 8.4% 7.6% 6.7% 6.2% 5.2% 4.0% 3.7% Cancer Infections Central Nervous System Cardiovascular and Circulatory System Autoimmune and Inflammation Metabolic/ Endocrinology Dermatology Respiratory and Pulmonary System Digestive System Blood and Lymphatic System
Proportion of product-based licensing agreements, 2001-2005
Source: MedTRACK Deals & Alliances database Business Insights Ltd
The greatest level of growth in product-based pharmaceutical licensing over the past four years has been in agreements involving cancer therapies, as shown in Figure 2.10. As a share of all product-based licensing, cancer indications have grown to the levels found in 2001, closely matching trends found for biotech licensing in general. Many biotech approaches in monoclonal antibodies and growth factors have their most
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valuable applications in the treatment of cancer. Other areas of licensing growth can be found in infections and autoimmune and inflammation indications, particularly in 2005. Leading therapy areas with more disappointing licensing growth rates include CNS and cardiovascular and circulatory system. With pharmaceutical licensing often involving agreements for the most successful R&D projects available, deal trends by therapy area provide a good indication of current and future R&D trends. It appears clear that we are likely to see some significant growth in the number of late stage cancer therapies coming through the pipeline, with more disappointing growth rates anticipated for CNS and cardiovascular and circulatory system therapies.
Figure 2.10: Number of product-based licensing deals by therapy area, 2001-2005 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 2001 2002 2003 2004 2005 P ropor ti on of pr oduc t-b a s e d l ic e n s ing de a ls Cancer Infections
Central Nervous System Autoimmune and Inflammation
Cardiovascular and Circulatory System
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By stage of development, there has been some recent movement towards pre-clinical licensing in 2005, as shown in Figure 2.11. More generally, there has been trend in licensing activity from phase II to phase I licensing over the period 2001 and 2005. The general share of R&D licensing for phase III compounds has remained relatively unchanged over the five-year period at around 20%.
Figure 2.11: Number of R&D licensing deals by development stage, 2001-2005
19.4% 19.7% 23.7% 20.2% 28.3% 16.2% 17.8% 19.5% 20.5% 18.0% 42.6% 39.4% 38.3% 37.2% 34.5% 21.8% 23.2% 18.5% 22.0% 19.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 P ropor ti on of R & D l ic e n s ing de a ls Phase III Phase II Phase I Pre Clinical
Source: MedTRACK Deals & Alliances database Business Insights Ltd
Looking at biotech R&D licensing deals specifically, there appears to have been a significant trend towards later stage deals between 2001 and 2005, as shown in Figure 2.12. For biotech R&D licensing deals, the proportion of agreements signed in phase II or later has grown from less than 20% in 2001 to almost 30% in 2005. Licensing agreements in later stages, particularly in phase II, appear to be driving growth in licensing activity over the past five years. This trend is consistent with the maturing of the biotech sector and the emergence of biotech companies with the resources and capabilities to develop lead drugs to later stages of clinical development before seeking
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a pharmaceutical partner. As a consequence of this trend, the value of licensing deals will inevitably increase as the risk involved with compounds found at later stages of development is reduced. The increased number of licensing candidates available at later stages of clinical development also helps to explain the stagnant growth in the number of agreements been signed by major companies. It is now possible for pharmaceutical companies to limit risk by in-licensing a single phase II compound rather than licensing two phase I compounds or a handful of preclinical opportunities. It appears that the biotech industry is better prepared to bear the costs of unsuccessful early stage compounds alone in order to share higher rewards with its partners for successful compounds in later stages of development.
Figure 2.12: Number of biotech R&D licensing deals by development stage, 2001-2005 73.2% 66.0% 63.7% 56.9% 59.0% 7.4% 10.5% 9.9% 13.1% 11.7% 19.4% 23.5% 26.4% 30.0% 29.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 P ropor ti on of R & D l ic e n s ing de a ls Phase II and above Preclinical/ Phase I Research
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CHAPTER 3
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Chapter 3
Licensing process
Summary
Growth in the number of companies involved in chasing each licensing agreement will lead to increased pressure on licensing lead times, requiring greater levels of resources to be committed to the identification and evaluation of potential opportunities and partners.
Deal failure is often the result of one or more partners not clearly identifying their strategic aims for a licensing deal. Pharmaceutical companies must not enter into an agreement without having determined that the licensing opportunity satisfies a real and valuable objective for the company.
Having a clear understanding of what you can and cannot offer potential partners is critical in order not to over promise or waste time negotiating over the wrong deal with the wrong partner.
Many small, but ambitious biotechnology companies have managed to do a good job with the preparation of presentation materials and the identification of target licensing partners only to make a bad job of establishing a first contact with the company and failing to make any further progress.
If you are a small biotech looking to agree a blockbuster late-stage licensing agreement with a top 10 pharmaceutical company you can either spend money on a good lawyer now to negotiate and agree a favorable contract or spend double the money later down the line having to continually defend claims from your eventual licensing partner.
Biotech companies look towards specialist agencies and key investors, such as venture capitalists, in order to support the licensing process. Pharmaceutical companies appear to have greater levels of licensing resources and expertise in-house, with the majority completing the entire licensing process without outside help.
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Introduction
The pharmaceutical licensing process is both lengthy and complex. Whether approaching licensing in order to acquire or divest intellectual property, there are five key steps that must be completed on the way to agreeing a successful licensing deal. Pharmaceutical companies must determine a clear licensing strategy, identify appropriate opportunities, evaluate those opportunities, negotiate favorable terms and then ensure agreements are successfully implemented and managed.
A complex process
Pharmaceutical licensing is a complex process involving the identification and valuation of multiple potential opportunities and partners. More than 75% of surveyed licensing executives expect the number of potential partners chasing each licensing deal to increase in 2006, as shown in Figure 3.13. Growth in the number of companies involved in chasing each licensing agreement will lead to increased pressure on licensing lead times, with greater levels of resources required for the identification and evaluation of potential opportunities and partners. With more companies chasing each deal, in-licensing companies will inevitably have to expand their initial opportunity screening numbers in order to maintain the same levels of successful deals at the end of the process. As shown in Figure 3.14, more than 25% of surveyed licensing executives expect the average time taken to complete the licensing process to increase in 2006, with less than 20% expecting the time to decrease.
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Figure 3.13: Expected change in number of potential partners chasing each licensing deal during 2006
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Pharma Biotech Other Overall
P ropor ti on of s u rv e y r e s ponde nt s Increasesignificantly Increase somewhat Stay roughly the same Decrease somewhat Decrease significantly
Source: Licensing trends survey, 2006 Business Insights Ltd
Figure 3.14: Expected change in the length of time required to complete a licensing deal during 2006
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Pharma Biotech Other Overall
P ropor ti on of s u rv e y r e s ponde nt s Increasesignificantly Increase somewhat Stay roughly the same Decrease somewhat Decrease significantly
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In-licensing versus out-licensing
While in-licensing or inward licensing is a very different proposition to out-licensing or outward licensing, the key stages through which companies must progress as part of the licensing process are similar. As shown in Figure 3.15, the licensing process always begins with a review of strategy. Setting out the strategic aims for licensing is essential in determining the direction and value benchmarks for subsequent phases of the process. Identifying opportunities means slightly different things to the in- and out-licensor, but involves a similar process of identifying and reviewing potential compounds/ technologies (for the in-licensor) or potential partners (for the out-licensor) in order to begin approaching and evaluating those opportunities.
Licensing valuations provide both a selection and deal structuring tool. Once a list of possible opportunities has been identified, some degree of evaluation must be undertaken in order to begin prioritizing those of greatest value in order to determine which opportunities should be pursued further or require more detailed scrutiny. Good licensing valuations also provide an essential input into the deal-making and agreement stage of the licensing process, helping to structure terms and values in order to reach a satisfactory agreement between licensing partners. Finally, it is important not to forget that the licensing process does not stop once signatures are added to a contract. The real hard work begins when agreements are being implemented and when problems arise that require solutions. In order to make sure all previous phases of the licensing process help to endorse good post-deal relations between licensing partners, it is important that deal outcomes are regularly fed-back to those charged with the responsibility for earlier phases of the licensing process. Licensing is an iterative process, whereby each deal provides lessons to inform better deal-making in the future.
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Figure 3.15: The pharmaceutical licensing process
Licensing strategy Post-deal management and analysis Deal-making and agreement Licensing evaluations Opportunity identification
What are our limitations? What are our needs?
What could be done better next time? What are my target/ acceptable risks, returns
and responsibilities? What is the value? What is the value to us?
What have I got? Who will value it? Where are the gaps?
What can we offer?
What could be done better next time? What are my target/ acceptable risks, returns
and responsibilities? What is the value? What is the value to us?
What do we need? Where will we find it?
In-licensing Out-licensing Licensing strategy Post-deal management and analysis Deal-making and agreement Licensing evaluations Opportunity identification
What are our limitations? What are our needs?
What could be done better next time? What are my target/ acceptable risks, returns
and responsibilities? What is the value? What is the value to us?
What have I got? Who will value it? Where are the gaps?
What can we offer?
What could be done better next time? What are my target/ acceptable risks, returns
and responsibilities? What is the value? What is the value to us?
What do we need? Where will we find it?
In-licensing Out-licensing
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Licensing strategy
Deal failure is often the fault of one or more partners not clearly identifying their strategic aims from a licensing deal. This does not mean that all deals have to be led by top-down strategic management, nor does it mean that there is no room for opportunistic deal-making that arises out of serendipity, rather than rigorous strategic evaluations. However, companies must not enter into an agreement without having determined that the licensing opportunity satisfies a real and valuable set of objectives for the company, which from a portfolio perspective represents a sound investment when compared with the strategic alternatives.
Licensing presents an integral part of today’s corporate strategy for pharmaceutical companies. Drug development is a long-term game that involves significant rewards, but only after undertaking costly investments over a long time period with a great risk of failure. In the current pharmaceutical environment, where investors require returns in both the long and short term, but where much of the ‘low hanging fruit’ for drug discovery and development has been exploited, licensing provides companies, large and small, with ways to limit costs and risk and bring about new products or revenue streams more quickly.
Portfolio management will continue to be the catalyst for building a balanced portfolio and maintaining strategic alignment across therapy areas, geographies and time-scales. However, licensing has emerged as an effective tool for establishing alignment, particularly where changes and adjustments are required over a short time period. The unforeseen failure of a key product in phase III trials is difficult to compensate for with an injection of R&D investment into a given therapy area. However, the in-licensing of a similar late stage project or the out-licensing of the failed project for development in other indications or by a company with lower ‘success’ thresholds provide real compensatory actions that serve to balance the strategic aims of the company over a short time period.
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Formulating a good licensing strategy is really a process of determining where you are as a company today and where you would like to be in the future. The difference between the two serves as a set of objectives for future licensing activity. Key areas of analysis involve:
Therapy area and physician profiles – understanding in which areas a company has strengths and deficiencies based on the current portfolio and pipeline of new drugs; Resources and financing – determining the excess or shortfall in the amount of
money and resource capacity available compared with the amount required;
R&D pipeline – entering new indication or supporting new brands with follow-up drugs by accessing either additional marketing expertise or additional products in specific markets;
Geographical coverage – maximizing the sales of key products across geographies, particularly those in which companies have no established in-house sales force; Drug delivery/ line extensions – partnering with drug delivery companies in order
to enhance the formulation of a product in order to extend its life-cycle;
R&D technology platforms – understanding current R&D capabilities and the potential productivity benefit of novel platforms, such as proteomics or nanotechnology.
Once a strategic review has been completed, the resulting licensing strategy needs to be presented to and agreed upon by senior management. The licensing strategy serves two purposes: it provides internal clarity on what needs to be done, but also provides potential partners with the reassurance that the company is committed to a clear strategy and is unlikely to under-resource either the licensing process or post-deal implementation.
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Having a clear understanding of what you can and cannot offer potential partners is critical in order not to over promise or waste time negotiating the wrong deal with the wrong partner.
Opportunity identification
Pharmaceutical licensing is best understood using the analogy of a dating agency. There are two key functions to perform – the presentation of yourself as a potential partner and the selection of appropriate profiles of potential partners. No matter how much effort is put into these two functions, the process for identifying licensing opportunities is not an exact science and is therefore fraught with inflated expectations and considerable disappointment. As with personal dating, pharmaceutical licensing suffers from an unfortunate externality resulting from the inflation of expectations and disappointment, which is that a highly skeptical opportunity screening process has emerged.
As in the ‘market for lemons’ – a microeconomics paper written by Nobel laureate George Akerlof about the market for second hand cars – if you cannot easily determine whether an opportunity or partner is a good one you inevitably assume it is a bad one. As such companies looking to present their compounds as good licensing opportunities or themselves as good licensing partners must find new ways to credibly elevate themselves above the mass of potential opportunities available for scrutiny. Saying you are young, attractive and blonde but not attaching a photo will not work in attracting a partner today. Companies need to demonstrate their strengths rather than simply listing them as a proof of suitability.
The process of opportunity identification is somewhat different for in-licensing and out-licensing.
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In-licensing
Companies looking to identify potential compounds/technologies for in-licensing must first determine an appropriate set of search criteria with which to produce a manageable list of potential opportunities. Having determined an agreed licensing strategy, broad criteria regarding specific market sectors, geographies and development stages will already provide the focus for the opportunity search. However, refinement of this list will take into account a more targeted set of criteria including:
Do we have the required R&D capabilities for this product?
Do we have the required sales and marketing capabilities for this product? Is the product likely to be made available for licensing?
Are we likely to be considered to be an attractive partner for this product?
A full list of search criteria – once an initial selection has been limited to the required therapy area, geographies and development stages – are used to eliminate specific opportunities. These would include the following:
Specific therapeutic classes and indications; Geographic availability;
Development stage and expected launch dates;
Maximum and minimum projected sales performance;
Key performance objectives (once-a-day dosing, low side effects etc); Risk profile (first in class, reformulation etc).
Identifying potential opportunities can involve significant research, but should be carried out in a logical way using the criteria identified above. Sales and marketing data, available from IMS Health or through other aggregators of product sales information provides a useful tool for identifying potential opportunities.
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Given that a high proportion of licensing occurs for development compounds, some of the best research sources for licensing opportunities are R&D databases such as LifeScience Analytics’ MedTRACK, Informa’s PharmaProjects, ADIS R&D Insight and IMS Health’s R&D Focus. Each has the ability to refine searches by indication, technology, development stage and company. In this way, a short list of suitable targets that meet these criteria can be formed. More detailed profiles for key drugs are also found in a number of the main databases which can further refine choices around sales projections and the likely risk involved with further development.
Aside from the desk research involving sales- and R&D-based database querying, the main source for identifying potential opportunities is the old-fashioned route of networking. There are a number of well-organized licensing network events and a number of websites, such as Pharmalicensing, that are now providing networking short cuts in order to pass-on details of available opportunities to potentially interested parties. It is still the major responsibility of any licensing or business development manager to form networks through which information about potential opportunities can quickly be shared. Above and beyond the direct networks between licensing and business development managers, there are significant roles to play for R&D managers and regional marketing teams. R&D managers, in particular, are exposed to many new developments and opportunities in the various therapy area-focused conferences and industry journals. These can often provide excellent sources for identifying new opportunities or for fleshing-out an early evaluation of a potential opportunity using the most up-to-date information.
In order to reduce the broad list of potential licensing opportunities to a more manageable size, a process of prioritization must be applied. A formal review stage is undertaken using a series of licensing opportunity profiles. These profiles present the relevant product information alongside status details for each of the key selection criteria. These standardized profiles then form the basis for a formal discussion regarding potential strategic fit, value and prioritization. As mentioned earlier, any determination of opportunity value must include an introspective look at whether you as a company can offer sufficient value to the partner to make it a valuable opportunity
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to them too. The prioritization of opportunities must include a realistic determination as to the likely success of subsequent deal negotiations. A licensing opportunity profile for a development compound should include the following:
Drug name (brand/ chemical); Originator/owner;
Planned indication(s); Intellectual property status;
Abstract (history, mechanism of action, potential competitive benefits etc); Development status (global/ regional);
Market profile (size, key players etc);
Clinical profile (patient size, clinical targets etc).
Out-licensing
For out-licensing, companies must look to both identify and present their own opportunities (compounds/technologies) as well as identify partnership opportunities with other companies. Before preparing presentational material for a licensing opportunity, a company looking to out-license must determine when and how to go about it. Determining when to license a compound involves the consideration of many factors such as how much risk and financial burden is the company able to bear and how well equipped is that company to continue further development of a compound alone. Deciding how to out-license a compound is often subject to the decision over when to out-license. Licensing at an early stage of clinical development may involve some element of co-development, but is unlikely to include the co-commercialization of the compound once it reaches the market. However, a late stage compound in phase III development is likely to yield significant returns for the out-licensor and include both co-development and co-commercialization rights. Other types of ‘transactional’
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licensing with limited collaboration often occur in early stage development or involve products been divested as part of post-merger anti-trust actions etc.
Having loosely determined the optimal window for licensing and the type of deal been sought, a team of qualified staff need to be brought together to draft the presentational licensing material or licensing prospectus. Usually this involves a non-confidential dossier that can be provided to any and all interested parties, and a more detailed confidential prospectus that is only shared after initial contact has been formed and the appropriate confidentiality agreements have been signed.
The confidential prospectus will include all relevant data available to support the product’s potential. For a development project this will focus on the expected clinical profile, the associated regulatory risks and the status of patent claims. The main sections to be included in the prospectus include:
Overview/summary – a one-to-two page summary presenting the key product features and potential value;
Therapeutic rationale – an outline of the mechanism of action and how and why this differs from other products;
Chemistry and pharmacy – an outline of the product’s chemistry including likely formulations and manufacturing processes;
Intellectual process – a review of the current patent position, expiry dates and any other intellectual property such as confidential information etc;
Experimental studies – a review of relevant data and observations from experimental work, in vitro and in vivo studies and any comparative data;
Clinical development – an outline of clinical objectives, pharmacology and study results including a detailed summary of completed pivotal studies;
Therapeutic potential – a review of the product’s commercial potential and how this links with a significant market opportunity;
